***ADDENDUM TWO*** REQUEST FOR PROPOSALS (RFP) Post Employment Benefits Other than Pensions Actuarial Valuation June 15, 2018

Transcription

1 ***ADDENDUM TWO*** REQUEST FOR PROPOSALS (RFP) Post Employment Benefits Other than Pensions Actuarial Valuation June 15, 2018 The following are answers to questions received by potential proposers. 1. Please provide copies of the most recent OPEB Actuarial valuation reports for GATRA. Attached 2. Please provide a copy of GATRA s most recent Comprehensive Annual Financial Report (CAFR). GATRA is not required to prepare, and does not issue a CAFR. 3. Please provide the actuarial fees paid for FY2015/2016, 2016/2017, and scheduled for FY2017/2018, for GATRA s OPEB actuarial valuation and consulting services. FY2015/2016 $5,000 and no fees paid for FY2016/2017. Fees for FY2017/2018 will be based upon responses received. 4. Please provide a reason for putting GATRA s OPEB work out for bid. Contracts are put out to bid in keeping with GATRA s procurement procedures.

2 GREATER ATTLEBORO TAUNTON REGIONAL TRANSIT AUTHORITY OTHER POSTEMPLOYMENT BENEFITS PROGRAM ACTUARIAL VALUATION July 1, 2014 Prepared by: Linda L. Bournival, FSA, EA, MAAA KMS Actuaries, LLC Fellow, Society of Actuaries Enrolled Actuary Member, American Academy of Actuaries and Christopher E. Bean, ASA, MAAA DBR Group, Inc. Associate, Society of Actuaries Member, American Academy of Actuaries

3 October 29, 2015 Mr. Daniel W. Burgess Chief Financial Officer Greater Attleboro Taunton Regional Transit Authority 10 Oak Street Taunton, MA Dear Dan: Enclosed is our report summarizing the results of an actuarial valuation of the Greater Attleboro Taunton Regional Transit Authority's Other Postemployment Benefits (OPEB) as of July 1, Our valuation was performed in accordance with the provisions contained in the GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (GASB 45). A summary of the valuation results is shown in Section 1. The principal results of our valuation are summarized in Section 2. The Plan Provisions and Actuarial Assumptions and Methods are shown in Sections 6 and 7, respectively. Section 8 summarizes the demographic profile of active employees and retirees. The required disclosures under GASB 45 are presented in Section 3. Our best estimate health care cost trend assumptions are based on recent experience and anticipated future cost increases under the Greater Attleboro Taunton Regional Transit Authority medical plans. Section 5 illustrates the sensitivity of actuarial accrued liability and annual required contribution to a one percentage increase and decrease in the health care cost trend assumption for each future year. Our actuarial valuation is based on a discount rate of 3.5% compounded annually. To illustrate the impact on cost of fully prefunding the Authority's benefit liabilities, our report also includes valuation results based on an alternative 7.5% discount rate. Section 5 illustrates the sensitivity of actuarial accrued liability and annual required contribution to a one percentage increase and decrease in the discount rate. We also provide 30-year forecasts of the OPEB liability under a pay-as-you-go funding and full prefunding arrangement as well as a 10-year forecast of the Annual OPEB Cost and the Net OPEB Obligation in Section 4.

4 Mr. Daniel W. Burgess October 29, 2015 Page 2 Our calculations were based on participant census data and other information provided by the Greater Attleboro Taunton Regional Transit Authority and the benefit provisions of the medical plans as described in the benefit summaries. Our valuation is also based on medical plan rates provided by the Authority in the file "Health Insurance Rates FY16" and the Medicare supplemental plan premium rates provided in the retiree data. Our valuation follows generally accepted actuarial methods and we perform such tests as we consider necessary to assure the accuracy of the results. The amounts presented in this report have been appropriately determined according to the actuarial assumptions and methods stated herein. We are members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. We appreciate this opportunity to be of service to the Greater Attleboro Taunton Regional Transit Authority. We are available to answer any questions with respect to our valuation. Respectfully submitted, Linda L. Bournival, FSA, EA, MAAA Member, American Academy of Actuaries Christopher E. Bean, ASA, MAAA Member, American Academy of Actuaries

5 TABLE OF CONTENTS ACTUARIAL CERTIFICATION 1 SECTION 1 - SUMMARY 2 SECTION 2 - PRINCIPAL VALUATION RESULTS 6 TABLE OPEB TRUST ASSETS TABLE ACTUARIAL ACCRUED LIABILITY TABLE NORMAL COST TABLE ANNUAL REQUIRED CONTRIBUTION AND ANNUAL OPEB COST SECTION 3 - GASB 45 ACCOUNTING DISCLOSURE 10 SECTION 4 - FORECASTS 11 TABLE FUNDING EXPECTED BENEFIT PAYMENTS TABLE FUNDING THE ANNUAL REQUIRED CONTRIBUTION TABLE ANNUAL OPEB COST AND NET OPEB OBLIGATION SECTION 5 - SENSITIVITY ANALYSIS 15 TABLE DISCOUNT RATE TABLE HEALTH CARE TREND RATES SECTION 6 - PLAN PROVISIONS 17 SECTION 7 - ACTUARIAL ASSUMPTIONS AND METHODS 18 SECTION 8 - PLAN MEMBER INFORMATION 23 TABLE ACTIVE EMPLOYEES BY AGE and YEARS OF SERVICE TABLE RETIRED EMPLOYEES, COVERED SPOUSES and SURVIVORS SECTION 9 - GOVERNMENTAL ACCOUNTING STANDARDS BOARD 25 STATEMENT NO. 45 GLOSSARY OF TERMS SECTION 10 - RESULTS BY SUBGROUP 27

6 ACTUARIAL CERTIFICATION This report presents the results of the Actuarial Valuation for the Greater Attleboro Taunton Regional Transit Authority Postemployment Benefits Other Than Pensions as of July 1, The report presents the accounting and financial reporting information in accordance with Statement Number 45 of the Governmental Accounting Standards Board (GASB 45). This valuation was performed using employee data and financial information provided to us by the Authority. Although we did not audit the data used in the valuation, we believe that the information is complete and reliable. This report was completed in accordance with generally accepted actuarial standards and procedures, and conforms to the Code of Professional Conduct of the American Academy of Actuaries. The actuarial assumptions other than those explicitly applicable to the postemployment benefit plans are consistent with those used by the Taunton Contributory Retirement System's actuaries for the Retirement System pension valuations. Future actuarial valuation results may differ significantly from the current results presented in this report. Examples of potential sources of volatility include plan experience differing from that anticipated by the economic or demographic assumptions, the effect of new entrants, changes in economic or demographic assumptions, the effect of law changes and the delayed effect of smoothing techniques. This report is intended for the sole use of the Greater Attleboro Taunton Regional Transit Authority and is intended to provide information to comply with the stated purpose of the report. It may not be appropriate for other purposes. The undersigned credentialed actuaries are Members of the American Academy of Actuaries and together meet the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinion contained herein. They are available to answer any questions with regard to this report. Respectfully submitted, Linda L. Bournival, FSA, EA, MAAA Member, American Academy of Actuaries Christopher E. Bean, ASA, MAAA Member, American Academy of Actuaries Page 1

7 BACKGROUND SECTION 1 - SUMMARY The Greater Attleboro Taunton Regional Transit Authority provides postemployment medical benefits to Authority retirees and their covered dependents. The Authority provides benefits as follows: Group 1 employees hired before April 2, 2012: retire after attaining age 55 with 10 or more years of service or any age with 20 or more years of service Group 1 employees hired after April 1, 2012: retire after attaining age 60 with 10 or more years of service Medical coverage continues to the spouse after the death of the retiree provided the spouse makes the required contributions. GASB 45 The Governmental Accounting Standards Board (GASB) is responsible for establishing accounting standards for governmental entities. Calculations developed in accordance with GASB standards are required when providing financial statements. GASB believes that postemployment benefits are a form of deferred compensation whose cost should be recognized while the employee actually renders services rather than when the actual benefits are paid, many years later. Ideally under the GASB standard the entire postemployment liability is recognized by the time an active participant begins to receive postemployment benefits. GASB 45 s focus is on postemployment benefits other than pensions, such as medical, dental and life insurance benefits. Unlike pensions where sponsors are pre-funding for benefits due in the future, the impact of GASB 45 will be to significantly increase cash pay-as-you-go expense. The effective date for GASB 45 is a function of the Authority's total annual revenues in the first fiscal year ending after June 15, We understand that this is your fiscal year that ended June 30, 1999, and that your related revenues were less than $10 million. As a result, the Authority was required to comply with GASB 45 for the fiscal year ending June 30, ACTUARIAL VALUATION As of July 1, 2014, there are 23 active employees who may be eligible for benefits in the future and 4 retired employees, covered spouses and survivors who are currently receiving benefits. Coverage is for individuals and families or individuals and spouses depending on the coverage selected. Page 2

8 SECTION 1 - SUMMARY Prior to GASB 45, the annual cost recognized was the annual premiums or benefits paid plus administrative expenses less any participant contributions paid towards the coverage. Under GASB 45, an annual cost for postemployment coverage is developed for any person who is currently receiving or who is currently actively employed and may be eligible to receive benefits in the future. In developing the GASB 45 cost for the Greater Attleboro Taunton Regional Transit Authority, the payment of future benefits is determined using the current schedule of premiums under the plans provided by the Authority modified to reflect the population and the fact that actual healthcare expenses are higher as individuals age. These age-adjusted costs are increased in the future under the annual healthcare cost trend rate assumptions. The age-adjusted per capita costs utilized in this valuation are detailed in Section 7, Actuarial Assumptions and Methods. It is important to understand that even though the Authority charges participants for coverage based on the individual or family premium schedule presented in our report, in developing a liability for the Authority, GASB requires that these premiums be adjusted as noted above. The plan premium represents less than 100% of the actual cost that is required to be recognized under the GASB standard. SUMMARY OF PRINCIPAL RESULTS A summary of the principal results of the current and prior valuations is presented below: Valuation Date July 1, 2014 June 30, 2012 * Summary of Member Data Active Members Average Age 48.6 N/A Average Service 8.5 N/A Retired Employees and Survivors 3 6 Average Age Covered Spouses 1 N/A Discount rate 3.50% 3.50% Actuarial Accrued Liability $3,209,291 $1,013,512 Normal Cost $229,037 $62,226 Assets $0 $0 Unfunded Actuarial Accrued Liability $3,209,291 $1,013,512 Annual Required Contribution $340,209 $92,944 Expected Benefit Payments $30,083 $21,427 * Results shown for the June 30, 2012 valuation are based on the report prepared by Buck Consultants. Page 3

9 SECTION 1 - SUMMARY ACTUARIAL ASSUMPTIONS The most important assumption for GASB 45 is the discount rate, which is used to discount future benefits to current age. GASB 45 requires that the discount rate accurately reflects the rate of return on assets dedicated to paying the retiree medical benefits. This means that a traditional pay-as-you-go system, which pays benefits from the Authority's annual budget and not a dedicated trust, must use a discount rate close to the rate of return on cash. Full pre-funding by use of a dedicated trust with a mixture of stocks and bonds can employ a higher discount rate that accurately reflects the expected return on trust assets dedicated to pay retiree medical benefits. For the Greater Attleboro Taunton Regional Transit Authority, we selected a 3.5% discount rate to reflect a pay-as-you-go system with an expected return close to the rate of return on cash. CHANGES Some assumptions used in this valuation have changed from those used in the June 30, 2012 valuation and are detailed in Section 7. The major assumption changes are summarized below: Actuarial Standards of Practice (ASOPs) now require that the payment of future benefits be determined using the current schedule of premiums under the plans provided by the Authority, modified to reflect the fact that actual healthcare expenses are higher as individuals age. In the previous valuation, the plan was considered to be "community rated" and therefore did not adjust the schedule of premiums as described above. RESULTS We have provided results based on a discount rate of 3.5%. As shown in Table 4.3 of Section 4, the Annual OPEB Cost for the fiscal year ending June 30, 2015 under GASB 45 is $342,663 and the estimated Annual OPEB Cost for the fiscal year ending June 30, 2016 under GASB 45 is $363,669. The accumulated Net OPEB Obligation as of June 30, 2015 is $912,829 and the estimated Net OPEB Obligation as of June 30, 2016 is $1,247,582. The Unfunded Actuarial Accrued Liability (UAAL) as of July 1, 2014 is $3,209,291. The UAAL is shown below: Actuarial Accrued Liability (AAL) Actives $2,727,532 Retirees, Beneficiaries and Surviving Spouses 481,759 Total Actuarial Accrued Liability $3,209,291 Actuarial Value of Assets Unfunded Actuarial Accrued Liability (UAAL) $0 $3,209,291 Page 4

10 SECTION 1 - SUMMARY ACTUARIAL GAIN/LOSS ANALYSIS In performing the actuarial valuation, various assumptions are made regarding future premium rates, mortality, retirement, disability and turnover rates as well as investment returns. A comparison of the results of the current valuation and the prior valuation is made to determine how closely actual experience relates to expected. Below is the development of the estimated Actuarial Gain or Loss for the current two-year period: June 30 Unfunded Actuarial Accrued Liability, beginning of year Normal Cost OPEB Contributions, plus benefit payments Interest Expected Unfunded Actuarial Accrued Liability, end of year Actual Unfunded Actuarial Accrued Liability (Gain)/Loss during the two-year period $1,013,512 $1,091,590 62,226 64,715 (21,427) (20,496) 37,279 40,115 $1,091,590 $1,175,924 $3,209,291 $2,033,367 The actuarial loss of $2,033,367 was mostly comprised of the following: loss as a result of less than favorable demographic experience 659,579 loss as a result of current premium rates greater than expected from the 1,373,788 prior valuation and use of age-based and gender-based morbidity tables Total (Gain)/Loss 2,033,367 REIMBURSEMENT FOR HEALTHCARE PREMIUM CONTRIBUTIONS Whenever the service of a retired employee is attributable to service in more than one Massachusetts governmental unit and the retired employee receives a healthcare premium contribution, Section 9A1/2 of M.G.L. Section 32B provides for reimbursement by other governmental units for the portion of healthcare premium contributions that corresponds to the percentage of the retiree's creditable service that is attributable for each governmental unit. The other governmental units shall be charged based on the Greater Attleboro Taunton Regional Transit Authority's contribution rate or the contribution rate of the first employer, whichever is lower. For purposes of this valuation, we have not taken into account any prior service rendered at other Massachusetts entities for current or future retirees for the Greater Attleboro Taunton Regional Transit Authority nor have we taken into account any service rendered by former Greater Attleboro Taunton Regional Transit Authority employees currently working at or retired from other Massachusetts entities that may notify the Greater Attleboro Taunton Regional Transit Authority of reimbursement due for former Greater Attleboro Taunton Regional Transit Authority employees. Page 5

11 SECTION 2 - PRINCIPAL VALUATION RESULTS The Greater Attleboro Taunton Regional Transit Authority has not established an irrevocable OPEB trust for the purpose of prefunding OPEB liabilities. Plan assets segregated and restricted in an OPEB trust must be dedicated to providing plan benefits to retirees and beneficiaries in accordance with the terms of the plan and must be legally protected from creditors of the employer. Further, employer contributions to the trust must be irrevocable. The Actuarial Value of Plan Assets is equal to the market value. The asset activity during the 2-year period July 1, 2012 through June 30, 2014 follows: TABLE OPEB TRUST ASSETS Market Value of Assets Fiscal Year Ending 6/30/2014 6/30/2013 Assets as of July 1 $0 $0 OPEB Trust Contributions 0 0 Benefits Paid 0 $0 Expenses 0 0 Investment Earnings 0 0 Assets as of June 30 $0 $0 Page 6

12 SECTION 2 - PRINCIPAL VALUATION RESULTS The Actuarial Accrued Liability is the portion of the Actuarial Present Value of Future Benefits which is allocated to all periods prior to a valuation year and therefore is not provided for by future Normal Costs. Below is the Actuarial Accrued Liability assuming a discount rate of 3.5%, the rate of return on cash, and 7.5%, the rate of return on a dedicated trust if the Authority were to fully pre-fund benefits: TABLE ACTUARIAL ACCRUED LIABILITY Pay-As-You-Go Full Pre-Funding Discount Rate 3.5% 7.5% Current Active Employees Pre-Medicare Gross Benefit $810,443 $523,093 Pre-Medicare Participant Contributions 49,652 32,428 Net Pre-Medicare Benefit $760,791 $490,665 Post - Medicare Gross Benefit $2,108,562 $851,293 Post - Medicare Participant Contributions 141,821 59,752 Net Post - Medicare Benefit $1,966,741 $791,541 Total Current Active Employees $2,727,532 $1,282,206 Current Retirees Pre-Medicare Gross Benefit $14,959 $14,679 Pre-Medicare Participant Contributions 1,025 1,005 Net Pre-Medicare Benefit $13,934 $13,674 Post - Medicare Gross Benefit $502,066 $339,856 Post - Medicare Participant Contributions 34,241 23,936 Net Post - Medicare Benefit $467,825 $315,920 Total Current Retirees $481,759 $329,594 Total Actuarial Accrued Liability (AAL) $3,209,291 $1,611,800 Page 7

13 SECTION 2 - PRINCIPAL VALUATION RESULTS The Normal Cost is the portion of the Actuarial Present Value of Future Benefits which is attributed to services rendered by active employees in the current year. Below is the Normal Cost assuming a discount rate of 3.5%, the rate of return on cash, and 7.5%, the rate of return on a dedicated trust if the Authority were to fully pre-fund benefits: TABLE NORMAL COST Pay-As-You-Go Full Pre-Funding Discount Rate 3.5% 7.5% Current Active Employees Pre-Medicare Gross Benefit $51,455 $29,178 Pre-Medicare Participant Contributions 3,031 1,728 Net Pre-Medicare Benefit $48,424 $27,450 Post - Medicare Gross Benefit $193,491 $71,871 Post - Medicare Participant Contributions 12,878 4,976 Net Post - Medicare Benefit $180,613 $66,895 Total Current Active Employees $229,037 $94,345 Current Retirees Pre-Medicare Gross Benefit $0 $0 Pre-Medicare Participant Contributions 0 0 Net Pre-Medicare Benefit $0 $0 Post - Medicare Gross Benefit $0 $0 Post - Medicare Participant Contributions 0 0 Net Post - Medicare Benefit $0 $0 Total Current Retirees $0 $0 Total Normal Cost (NC) $229,037 $94,345 Page 8

14 SECTION 2 - PRINCIPAL VALUATION RESULTS Under GASB 45, the Annual Required Contribution (ARC) of the employer equals the Normal Cost plus a provision for amortizing the Unfunded Actuarial Accrued Liability. We have assumed increasing dollar amortization over the maximum acceptable amortization period of 30 years. For the period beginning July 1, 2014, the ARC, calculated under the parameters of this actuarial valuation, would be: TABLE ANNUAL REQUIRED CONTRIBUTION and ANNUAL OPEB COST Pay-As-You-Go Full Pre-Funding Discount Rate 3.5% 7.5% 1. Normal Cost $229,037 $94, Unfunded Actuarial Accrued Liability a. Actuarial Accrued Liability $3,209,291 $1,611,800 b. Actuarial Value of Plan Assets $0 $0 c. Unfunded Actuarial Accrued Liability $3,209,291 $1,611, Amortization of Unfunded Actuarial Accrued Liability a. Unfunded Actuarial Accrued Liability $3,209,291 $1,611,800 b. Amortization Period in years c. Factor Increasing Rate 4.0% 4.0% d. Amortization Factor e. Amortization Amount (3.a. / 3.d.) $99,667 $83, Interest on 1. and 3.e. $11,505 $13, Annual Required Contribution ( e. + 4.) $340,209 $191, Net OPEB Obligation, beginning of year $600,249 Not Applicable 7. Interest on Net OPEB Obligation at 3.5% $21,009 Not Applicable 8. Adjustment to Annual Required Contribution at 3.5% ($18,555) Not Applicable 9. Annual OPEB Cost ( ) $342,663 Not Applicable Page 9

15 SECTION 3 - GASB 45 ACCOUNTING DISCLOSURE GASB 45 requires disclosure of the annual OPEB cost, the Net OPEB Obligation and the Schedule of Funding Progress. In addition, information about the Substantive Plan Provisions and the Actuarial Methods and Assumptions used in the valuation are disclosed, which are provided in Section 6 and Section 7, respectively. Annual OPEB Cost and Net OPEB Obligation¹ 6/30/2015 6/30/2014 6/30/2013 Fiscal Year Ending 6/30/2013 6/30/2015 6/30/2014 6/30/2013 Discount rate 3.5% 3.50% 3.50% 3.50% Annual Required Contribution $340,209 $340,209 $103,742 $98,176 Interest on Net OPEB Obligation 21,009 21,009 18,047 15,158 Adjustment to annual required contribution (18,555) (18,555) (15,469) 10,271 Annual OPEB Cost $379,773 $342,663 $106,320 $123,605 Expected Benefit Payments (30,083) (21,688) (17,812) Employer contributions to OPEB Trust Total employer contributions 30,083 (30,083) (21,688) (17,812) Change in Net OPEB Obligation $349,690 $312,580 $84,632 $105,793 Net OPEB Obligation - beginning of year $912,829 $600,249 $515,617 $409,824 ¹ Net OPEB Obligation - end of year $1,262,519 $912,829 $600,249 $515,617 Entries for FY2013 and FY2014 are based on information provided in the Authority's audited financial statements. Fiscal Year Ended Annual OPEB Cost Plan History Percentage of Annual OPEB Cost Contributed Net OPEB Obligation 6/30/ , % 912,829 6/30/ , % 600,249 6/30/ , % 515,617 Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (b) Schedule of Funding Progress Unfunded AAL (UAAL) (b-a) Funded Ratio (a/b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll ((b-a) / c) 7/1/ ,209,291 3,209, % 1,053, % 6/30/ ,013,512 1,013, % 702, % 6/30/ ,448,456 1,448, % 643, % Page 10

16 SECTION 4 - FORECASTS OVERVIEW In Section 4, we have provided 30-year forecasts of the annual funding requirements, accrued liability, assets and unfunded actuarial accrued liability under a pay-as-you-go funded scenario and fully funded scenario. The entries in Tables 4.1 and 4.2 are based on the assumptions stated below: Expected Benefit Payments are developed in the actuarial valuation and are based on the assumptions detailed in Section 7. Normal Cost is assumed to increase annually by 4%. Assets are assumed to grow annually at the selected discount rate plus OPEB Trust Contributions made at the end of each fiscal year. Actuarial Accrued Liability (AAL), end of year, equals AAL, beginning of year, plus Normal Cost less Expected Benefit Payments plus interest on these items. Unfunded Actuarial Accrued Liability (UAAL) equals the AAL less Assets. The Annual Required Contribution (ARC) is the sum of the Normal Cost, the Amortization Amount and Interest. Table 4.1 is based on funding the Expected Benefit Payments on a pay-as-you-go basis. The assumed discount rate is 3.5%. Amortization Amount is the amount necessary to amortize the Unfunded Actuarial Accrued Liability over 30 years at a discount rate of 3.5% on an open amortization basis. The open amortization period is 30 years, recalculated at each valuation. Table 4.2 is based on fully funding the Annual Required Contribution (ARC) each year. The assumed discount rate is 7.5%. Amortization Amount is the amount necessary to amortize the Unfunded Actuarial Accrued Liability over 30 years at a discount rate of 7.5% on a closed amortization basis. The closed amortization period is 30 years at year one declining to zero after 30 years. This method fully funds the UAL at the end of 30 years. Assumes OPEB Trust Contributions equal to the excess of the ARC over the Expected Benefit Payments. Page 11

17 SECTION 4 - FORECASTS TABLE Funding Expected Benefit Payments FYE June 30 (1) Normal Cost (2) Actuarial Accrued Liability (3) Expected Benefit Payments (4) Actuarial Value of Assets (5) Unfunded Actuarial Accrued Liability (2) - (4) (6) Amortization Amount (7) Interest (8) ARC (1) + (6) + (7) (9) OPEB Trust Contributions ,037 3,209,291 30,083-3,209,291 99,667 11, , ,198 3,528,065 28,916-3,528, ,567 12, , ,726 3,868,665 43,066-3,868, ,145 12, , ,635 4,216,652 57,213-4,216, ,952 13, , ,940 4,572,681 78,902-4,572, ,009 14, , ,658 4,929,772 83,353-4,929, ,099 15, , ,804 5,305,926 94,358-5,305, ,780 15, , ,396 5,695, ,572-5,695, ,882 16, , ,452 6,088, ,186-6,088, ,077 17, , ,990 6,504, ,208-6,504, ,004 18, , ,030 6,918, ,011-6,918, ,870 19, , ,591 7,356, ,121-7,356, ,454 20, , ,695 7,827, ,275-7,827, ,103 21, , ,363 8,326, ,646-8,326, ,587 22, , ,618 8,831, ,013-8,831, ,283 23, , ,483 9,352, ,456-9,352, ,438 24, , ,982 9,915, ,296-9,915, ,940 25, , ,141 10,512, ,801-10,512, ,462 27, , ,987 11,146, ,026-11,146, ,169 28, , ,546 11,798, ,890-11,798, ,405 29, , ,848 12,474, ,906-12,474, ,413 31, , ,922 13,173, ,590-13,173, ,113 32, , ,799 13,895, ,586-13,895, ,532 34,102 1,008, ,511 14,633, ,806-14,633, ,460 35,664 1,054, ,091 15,419, ,609-15,419, ,880 37,309 1,103, ,575 16,240, ,973-16,240, ,351 39,022 1,153, ,998 17,084, ,269-17,084, ,571 40,795 1,206, ,398 17,989, ,114-17,989, ,675 42,668 1,261, ,814 18,941, ,199-18,941, ,236 44,627 1,319, ,287 19,938, ,014-19,938, ,204 46,672 1,380, ,858 20,997, ,331-20,997, ,082 48,823 1,443, years open, 3.5% discount rate. Page 12

18 SECTION 4 - FORECASTS TABLE Funding the Annual Required Contribution (ARC) FYE June 30 (1) Normal Cost (2) Actuarial Accrued Liability (3) Expected Benefit Payments (4) Actuarial Value of Assets (5) Unfunded Actuarial Accrued Liability (2) - (4) (6) Amortization Amount (7) Interest (8) ARC (1) + (6) + (7) (9) OPEB Trust Contributions ,345 1,611,800 30,083-1,611,800 83,340 13, , ,119 1,804,023 28,916-1,804,023 95,199 14, , , ,044 2,015,887 43, ,901 1,836,986 98,976 15, , , ,126 2,233,710 57, ,350 1,868, ,940 15, , , ,371 2,458,111 78, ,284 1,897, ,101 16, , , ,786 2,682,216 83, ,185 1,925, ,338 16, , , ,377 2,923,424 94, ,704 1,949, ,779 17, , , ,152 3,176, ,572 1,205,167 1,971, ,433 18, , , ,118 3,431, ,186 1,441,912 1,989, ,229 19, , , ,283 3,708, ,208 1,704,292 2,004, ,247 19, , , ,654 3,983, ,011 1,968,276 2,014, ,496 20, , , ,240 4,278, ,121 2,258,672 2,020, ,884 21, , , ,050 4,607, ,275 2,587,534 2,020, ,508 22, , , ,092 4,963, ,646 2,949,199 2,014, ,373 23, , , ,376 5,327, ,013 3,325,418 2,001, ,484 24, , , ,911 5,706, ,456 3,724,811 1,981, ,843 25, , , ,707 6,129, ,296 4,176,577 1,952, ,449 26, , , ,775 6,587, ,801 4,672,792 1,914, ,302 27, , , ,126 7,087, ,026 5,220,683 1,866, ,393 28, , , ,771 7,609, ,890 5,801,966 1,807, ,917 29, , , ,722 8,162, ,906 6,426,288 1,735, ,441 30, , , ,991 8,743, ,590 7,093,054 1,650, ,663 31, , , ,591 9,355, ,586 7,805,871 1,550, ,784 33, , , ,535 9,993, ,806 8,560,128 1,433, ,703 34, , , ,836 10,688, ,609 9,389,938 1,298, ,733 35, , , ,509 11,427, ,973 10,284,886 1,143, ,250 37, , , ,569 12,205, ,269 11,239, , ,609 38, , , ,032 13,057, ,114 12,291, , ,169 40, , , ,913 13,974, ,199 13,434, , ,891 41, , , ,230 14,956, ,014 14,670, , ,601 43, , , ,999 16,022, ,331 16,022, , , years closed, 7.5% discount rate. Page 13

19 SECTION 4 - FORECASTS FYE June 30 ARC Interest on Net OPEB Obligation TABLE ANNUAL OPEB COST and NET OPEB OBLIGATION ARC Adjustment Amortization Factor Annual OPEB Cost Employer Contributions Change in Net OPEB Obligation Net OPEB Obligation Balance 600, ,209 21,009 (18,555) ,663 30, , , ,937 31,949 (28,217) ,669 28, ,753 1,247, ,746 43,665 (38,565) ,846 43, ,780 1,590, ,188 55,663 (49,161) ,690 57, ,477 1,941, ,297 67,964 (60,026) ,235 78, ,333 2,295, ,868 80,331 (70,948) ,251 83, ,898 2,668, ,494 93,382 (82,475) ,401 94, ,043 3,055, , ,929 (94,439) , , ,936 3,446, , ,612 (106,524) , , ,020 3,861, , ,137 (119,353) , , ,050 4,275,119 Notes: 1. ARC and Employer Contributions are from 30-Year Forecast of Annual Required Contributions (Table 4.1). 2. Interest on Net OPEB Obligation is computed on the prior year Net OPEB Obligation Balance. 3. ARC Adjustment is the prior year Net OPEB Obligation Balance amortized over 30 years. 4. OPEB Cost is the ARC plus Interest on Net OPEB Obligation plus ARC Adjustment. 5. Change in Net OPEB Obligation is the difference between the OPEB Cost and Employer Contributions. 6. Net OPEB Obligation is the prior year Net OPEB Obligation Balance plus Change in Net OPEB Obligation. 7. Year one Interest on Net OPEB Obligation and ARC Adjustment computed at prior discount rate of 3.5%. 8. Subsequent years' Interest on Net OPEB Obligation and ARC Adjustment computed at current discount rate of 3.5%. Page 14

20 SECTION 5 - SENSITIVITY ANALYSIS Below we illustrate the sensitivity of the Actuarial Accrued Liability and the Annual Required Contribution to a one percentage increase and decrease in the discount rate: TABLE DISCOUNT RATE ASSUMPTION Discount Rate -1% Assumed Discount Rate Discount Rate +1% Discount Rate 2.5% 3.5% 4.5% Actuarial Accrued Liability Current Active Employees $3,513,613 $2,727,532 $2,158,987 Current Retirees 553, , ,628 Total Actuarial Accrued Liability $4,067,363 $3,209,291 $2,581,615 Change % 26.74% % Annual Required Contribution Normal Cost $305,579 $229,037 $174,679 Actuarial Accrued Liability $4,067,363 $3,209,291 $2,581,615 Actuarial Value of Assets Unfunded Actuarial Accrued Liability $4,067,363 $3,209,291 $2,581,615 Amortization Payment 108,957 99,667 92,168 Interest 10,363 11,505 12,008 Annual Required Contribution $424,899 $340,209 $278,855 Change % 24.89% % Page 15

21 SECTION 5 - SENSITIVITY ANALYSIS Below we illustrate the sensitivity of the Actuarial Accrued Liability and the Annual Required Contribution to a one percentage increase and decrease in health care cost trend assumption for each future year: TABLE HEALTH CARE COST TREND ASSUMPTION Trend -1% Assumed Trend Trend +1% Discount Rate 3.5% 3.5% 3.5% Actuarial Accrued Liability Current Active Employees $2,122,133 $2,727,532 $3,640,603 Current Retirees 423, , ,932 Total Actuarial Accrued Liability $2,545,806 $3,209,291 $4,201,535 Change % % 30.92% Annual Required Contribution Normal Cost $170,881 $229,037 $318,586 Actuarial Accrued Liability $2,545,806 $3,209,291 $4,201,535 Actuarial Value of Assets Unfunded Actuarial Accrued Liability $2,545,806 $3,209,291 $4,201,535 Amortization Payment 79,062 99, ,482 Interest 8,748 11,505 15,717 Annual Required Contribution $258,691 $340,209 $464,785 Change % % 36.62% Page 16

22 SECTION 6 - PLAN PROVISIONS Retirement Eligibility: Group 1 employees hired before April 2, 2012: retire after attaining age 55 with 10 or more years of service or any age with 20 or more years of service Group 1 employees hired after April 1, 2012: retire after attaining age 60 with 10 or more years of service Ordinary Disability Eligibility: Any member who is unable to perform his or her duties due to a nonoccupational disability and has ten or more years of creditable service. Accidental Disability Eligibility: Any member who is unable to perform his or her duties due to a job-related disability. Medical Premium Rates: We have utilized the plans offered to active employees for the non-medicare plans as there are currently no retirees under age 65 who have elected coverage. The total monthly costs by plan are shown below: Non-Medicare Plans - July 1, 2015 Network Blue New England HMO Blue Care Elect PPO Medicare Plans - January 1, 2015 Medicare Supplemental Plan Individual Family $ $1, $1, $2, $ Dental Reimbursement: Participant Contributions: We assumed an annual reimbursement of $500 per retiree. Retired employees contribute 10% of the total medical premium cost. Continuation of Coverage to Spouse After Death of Retiree: Surviving spouse may continue coverage for lifetime by paying the required medical premium rates. Life Insurance Benefit: PPACA Excise Tax: None. The Patient Protection and Affordable Care Act (PPACA) applies a 40% excise tax, commonly referred to as the "Cadillac Tax", to the cost of plan benefits in excess of statutory thresholds beginning in The 2018 thresholds are assumed to be $10,200 for individual and $27,500 for family coverage and increase by the Consumer Price Index (CPI) in future years. The annual limits are increased by $1,650 for individual and $3,450 for family coverage for retirees not eligible for Medicare benefits. Page 17

23 SECTION 7 - ACTUARIAL ASSUMPTIONS AND METHODS Valuation Date: Discount Rates: Amortization Method: July 1, % pay-as-you-go. 7.50% full pre-funding. Previously, 8%. Increasing at 4.% per year over 30 years on an open amortization period for pay-as-you-go. Increasing at 4.% per year over 30 years on a closed amortization period for full pre-funding. Health Care Cost Trend Rates: Year Current Prior % 8.00% % 7.50% % 7.00% % 6.50% % 6.00% % 5.50% % 5.00% % 4.50% Ultimate 4.50% 4.50% Year Current Dental Trend All 0.00% Prior Not disclosed Consumer Price Index (CPI): 3% per year. Medical Plan Participation: 100% of eligible retirees will elect medical coverage upon retirement. Dental Plan Participation: 35% of eligible retirees will elect dental coverage upon retirement. Dependent Status: Male spouses are assumed to be three years older and female spouses are assumed to be three years younger than the retired employee. 80% of male employees are assumed to retire with a covered spouse and 60% of female employees are assumed to retire with a covered spouse. For current retirees, the actual census information provided is used. Page 18

24 SECTION 7 - ACTUARIAL ASSUMPTIONS AND METHODS Medical Per Capita Costs: Annual per capita costs for the fiscal year beginning July 1, 2014 are as follows: Age Male Female Under 20 $3,484 $4, $2,746 $4, $2,857 $6, $3,589 $8, $4,502 $8, $5,610 $8, $7,080 $9, $9,331 $11, $12,125 $12, $15,561 $15, $3,646 $3, $4,369 $4, $5,160 $4, $5,931 $5, $6,607 $6, $7,192 $6, $7,644 $6,430 Retiree Contributions: Annual average per capita participant contributions for the fiscal year beginning July 1, 2014 are as follows: Plan Non-Medicare Plans Medicare Plans Retiree Contribution 10% $1,043 $359 Page 19

25 SECTION 7 - ACTUARIAL ASSUMPTIONS AND METHODS Excise Tax: For purposes of estimating the excise tax, per capita plan costs are developed for individual and family coverage for both Medicare and non- Medicare members. These plan costs are compared to the thresholds stipulated in the Patient Protection and Affordable Care Act (PPACA). Beginning in 2018, a 40% excise tax is applied on the excess of the plan costs over the thresholds, which increase annually by CPI. Actuarial Cost Method: Projected Unit Credit. The costs of each employee's postemployment benefits are allocated on a pro rata basis from the employee's date of hire to the date the employee is fully eligible for benefits. Employee Data: Employee and retiree data were submitted by the Authority. We made reasonable adjustments for missing or invalid data. Page 20

26 SECTION 7 - ACTUARIAL ASSUMPTIONS AND METHODS Post-Retirement Mortality: Post-retirement mortality rates for General employees are based on the RP Combined Mortality Table, projected with fully generational mortality improvement using Scale AA. Pre-Retirement Mortality: Pre-retirement mortality rates for General employees are based on the RP Combined Mortality Table, projected with fully generational mortality improvement using Scale AA. Turnover Rates: Turnover rates for General employees are as follows: General Public Safety Service Rate Service Rate % % % % % % Disability Rates: Disability rates for General employees are as follows: General Age Rate Rate % 0.10% % 0.30% % 0.30% % 1.25% Public Safety 55% of the General employee disabilities are job-related. Page 21

27 SECTION 7 - ACTUARIAL ASSUMPTIONS AND METHODS Retirement Rates: Retirement rates for General employees are as follows (based on hire date): Prior to 4/2/2012 After 4/1/2012 Age Male Female Male Female % 1.50% 0.00% 0.00% % 2.00% 0.00% 0.00% % 2.50% 0.00% 0.00% % 2.50% 0.00% 0.00% % 5.50% 0.00% 0.00% % 6.50% 0.00% 0.00% % 6.50% 0.00% 0.00% % 6.50% 0.00% 0.00% % 5.00% 5.00% 6.50% % 13.00% 6.50% 6.50% % 15.00% 20.00% 15.00% % 12.50% 20.00% 13.00% % 18.00% 30.00% 15.00% % 15.00% 25.00% 12.50% % 20.00% 22.00% 18.00% % 20.00% 40.00% 25.00% % 25.00% 30.00% 20.00% % 20.00% 30.00% 20.00% % % % % Page 22

28 SECTION 8 - PLAN MEMBER INFORMATION TABLE ACTIVE EMPLOYEES BY AGE and YEARS OF SERVICE AS OF JULY 1, 2014 Years of Service Age 0 to 4 5 to 9 10 to to to to to to & up Total Percent Under % 25 to % 30 to % 35 to % 40 to % 45 to % 50 to % 55 to % 60 to % 65 to % 70 & up % Total Percent 48% 17% 9% 17% 0% 0% 9% 0% 0% 100% Average Age: 48.6 Average Service: 8.5 Page 23

29 SECTION 8 - PLAN MEMBER INFORMATION TABLE RETIRED EMPLOYEES, COVERED SPOUSES and SURVIVORS AS OF JULY 1, 2014 Age Network Blue New England HMO Blue Care Elect PPO Medicare Supplemental Plan Total Under to to to to to to to to to to Total Covered Spouses Page 24

30 SECTION 9 - GASB 45 GLOSSARY OF TERMS Actuarial Accrued Liability The portion of the Actuarial Present Value of future benefits which is allocated to all periods prior to a valuation year and therefore is not provided by future Normal Costs. Actuarial Assumptions Assumptions as to the occurrence of future events affecting OPEB costs, such as mortality, withdrawal, disablement and retirement; changes in compensation and Government provided pension benefits; rates of investment earnings and asset appreciation or depreciation; procedures used to determine the Actuarial Value of Assets; characteristics of future entrants for Open Group Actuarial Cost Methods; and other relevant items. Actuarial Present Value of Future Benefits The present value of the cost to finance all benefits payable in the future, discounted to reflect the probability of payment and the time value of money. Actuarial Valuation the determination, as of a valuation date, of the Normal Cost, Actuarial Accrued Liability, Actuarial Value of Assets and related Actuarial Present Values for an OPEB plan. Actuarial Value of Assets The value of plan assets used in an actuarial valuation. The Actuarial Value of Assets may reflect smoothing techniques intended to dampen year-to-year fluctuations in the market value of assets. Annual OPEB Cost - The accrual basis annual cost for the OPEB plan sponsored by the employer. In the year of implementation of GASB 45, the Annual OPEB Cost equals the ARC. In subsequent years, if an employer has a Net OPEB Obligation, Annual OPEB Cost equals the ARC plus one year's interest on the Net OPEB Obligation plus an adjustment to the ARC. Annual Required Contribution (ARC) Includes the employer's Normal Cost and a provision for amortizing the Unfunded Actuarial Accrued Liability. Expected Benefit Payments Those OPEB amounts that are expected to be paid by the employer at various future times under a particular set of Actuarial Assumptions, taking into account such times as the advancement in age and past and future service credits. Explicit Subsidy The difference between (a) the blended rates based on combined active and retired member experience and (b) actual cash contributions made by the employer. Funded Ratio The Actuarial Value of Assets expressed as a percentage of the Actuarial Accrued Liability. Health Cost Trend Rate The rate of change in per capita health claims cost over time as a result of factors such as medical inflation, utilization of healthcare services, plan design, and technological developments. Page 25

31 SECTION 9 - GASB 45 GLOSSARY OF TERMS Implicit Subsidy In an experience-rated healthcare plan that includes both active employees and retirees with blended premium rates for all plan members, the difference between (a) the age-adjusted premiums approximating claim costs for retirees in the group and (b) the blended rates based on combined active and retired member experience. Net OPEB Obligation The cumulative excess since adoption of GASB 45 of Annual OPEB Cost over the employer's contributions to the plan. Normal Cost The portion of the Actuarial Present Value of Future Benefits which is allocated to a valuation year. OPEB Other Postemployment Benefits including medical, dental, vision, hearing and life insurance benefits. Plan Assets Investments segregated and restricted in a trust or similar arrangement under which: employer contributions to the trust are irrevocable, assets are dedicated to providing plan benefits, and assets are legally protected from creditors. Pay-As-You-Go A method of financing an OPEB plan under which the contributions to the plan are generally made at about the same time and in about the same amount as benefit payments and expenses becoming due. Present Value of Future Benefits The actuarial present value of the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value of money and the probabilities of payment. Projected Unit Credit Actuarial Cost Method A method under which the projected benefits of each individual included in an Actuarial Valuation are allocated by a consistent formula to valuation years. Projected Unit Credit is one of the actuarial cost methods allowed and most often used for developing liabilities under GASB 45. Substantive Plan The terms of an OPEB plan as understood by the employer and plan members. Unfunded Actuarial Accrued Liability The excess of Actuarial Accrued Liability over the Actuarial Value of Assets. Page 26